THE PRECONCEPTIONS OF ECONOMIC SCIENCE, PART III
Thorstein Veblen
The Quarterly Journal of Economics, volume 14, 1900.
IN what has already been said, it has appeared that the changes
which have supervened in the preconceptions of the earlier
economists constitute a somewhat orderly succession. The feature
of chief interest in this development has been a gradual change
in the received grounds of finality to which the successive
generations of economists have brought their theoretical output,
on which they have been content to rest their conclusions, and
beyond which they have not been moved to push their analysis of
events or their scrutiny of phenomena. There has been a fairly
unbroken sequence of development in what may be called the canons
of economic reality; or, to put it in other words, there has been
a precession of the point of view from which facts have been
handled and valued for the purpose of economic science.
The notion which has in its time prevailed so widely, that
there is in the sequence of events a consistent trend which it is
the office of the science to ascertain and turn to account, --
this notion may be well founded or not. But that there is
something of such a consistent trend in the sequence of the
canons of knowledge under whose guidance the scientist works is
not only a generalisation from the past course of things, but
lies in the nature of the case; for the canons of knowledge are
of the nature of habits of thought, and habit does not break with
the past, nor do the hereditary aptitudes that find expression in
habit vary gratuitously with the mere lapse of time. What is true
in this respect, for instance, in the domain of law and
institutions is true, likewise, in the domain of science. What
men have learned to accept as good and definitive for the
guidance of conduct and of human relations remains true and
definitive and unimpeachable until the exigencies of a later,
altered situation enforce a variation from the norms and canons
of the past, and so give rise to a modification of the habits of
thought that decide what is, for the time, right in human
conduct. So in good and science the ancient ground of finality
remains a valid test of scientific truth until the altered
exigencies of later life enforce habits of thought that are not
wholly in consonance with the received notions as to what
constitutes the ultimate, self-legitimating term -- the
substantial reality -- to which knowledge in any given case must
penetrate.
This ultimate term or ground of knowledge is always of a
metaphysical character. It is something in the way of a
preconception, accepted uncritically, but applied in criticism
and demonstration of all else with which the science is
concerned. So soon as it comes to be criticised, it is in a way
to be superseded by a new, more or less altered formulation; for
criticism of it means that it is no longer fit to survive
unaltered in the altered complex of habits of thought to which it
is called upon to serve as fundamental principle. It is subject
to natural selection and selective adaptation, as are other
conventions. The underlying metaphysics of scientific research
and purpose, therefore, changes gradually and, of course,
incompletely, much as is the case with the metaphysics underlying
the common law and the schedule of civil rights. As in the legal
framework the now avowedly useless and meaningless preconceptions
of status and caste and precedent are even yet at the most
metamorphosed and obsolescent rather than overpassed, -- witness
the facts of inheritance, vested interests, the outlawry of debts
through lapse of time, the competence of the State to coerce
individuals into support of a given, policy -- so in the science
the living generation has not seen an abrupt and traceless
disappearance of the metaphysics that fixed the point of view of
the early classical political economy. This is true even for
those groups of economists who have most incontinently protested
against the absurdity of the classical doctrines and methods. In
Professor Marshall's words, "There has been no real breach of
continuity in the development of the science,"
But, while there has been no breach, there has none the less
been change, -- more far-reaching change than some of us are glad
to recognise; for who would not be glad to read his own modern
views into the convincing words of the great masters?
Seen through modern eyes and without effort to turn past
gains to modern account, the metaphysical or preconceptional
furniture of political economy as it stood about the middle of
this century may come to look quite curious. The two main canons
of truth on which the science proceeded, and with which the
inquiry is here concerned, were: (a) a hedonistic -associational
psychology, and (b) an uncritical conviction that there is a
meliorative trend in the course of events, apart from the
conscious ends of the individual members of the community. This
axiom of a meliorative developmental trend fell into shape as a
belief in an organic or quasi-organic (physiological)(1*) life
process on the part of the economic community or of the nation;
and this belief carried with it something of a constraining sense
of self realising cycles of growth, maturity and decay in the
life history of nations or communities.
Neglecting what may for the immediate purpose be negligible
in this outline of fundamental tenets, it will bear the following
construction. (a) On the ground of the hedonistic or
associational psychology, all spiritual continuity and any
consequent teleological trend is tacitly denied so far as regards
individual conduct, where the later psychology, and the sciences
which build on this later psychology, insist upon and find such a
teleological trend at every turn. (b) Such a spiritual or
quasi-spiritual continuity and teleological trend is uncritically
affirmed as regards the non-human sequence or the sequence of
events in the affairs of collective life, where the modern
sciences diligently assert that nothing of the kind is
discernible, or that, if it is discernible, its recognition is
beside the point, so far as concerns the purposes of the science.
This position, here outlined with as little qualification as
may be admissible, embodies the general metaphysical ground of
that classical political economy that affords the point of
departure for Mill and Cairnes, and also for Jevons. And what is
to be said of Mill and Cairnes in this connection will apply to
the later course of the science, though with a gradually
lessening force.
`By the middle of the century the psychological premises of the
science are no longer so neat and succinct as they were in the
days of Bentham and James Mill. At J.S. Mill's hands. for
instance, the naively quantitative hedonism of Bentham is being
supplanted by a sophisticated hedonism, which makes much of an
assumed qualitative divergence between the different kinds of
pleasures that afford the motives of conduct. This revision of
hedonistic dogma, of course, means a departure from the strict
hedonistic ground. Correlated with this advance more closely in
the substance of the change than in the assignable dates, is a
concomitant improvement -- at least, set forth as an improvement
-- upon the received associational psychology, whereby
"similarity" is brought in to supplement "contiguity" as a ground
of connection between ideas. This change is well shown in the
work of J.S. Mill and Bain. In spite of all the ingenuity spent
in maintaining the associational legitimacy of this new article
of theory, it remains a patent innovation and a departure from
the ancient standpoint. As is true of the improved hedonism, so
it is true of the new theory of association that it is no longer
able to construe the process which it discusses as a purely
mechanical process, a concatenation of items simply. Similarity
of impressions implies a comparison of impressions by the mind in
which the association takes place, and thereby it implies some
degree of constructive work on the part of the perceiving
subject. The perceiver is thereby construed to be an agent in the
work of perception; therefore, he must be possessed of a point of
view and an end dominating the perceptive process. To perceive
the similarity, he must be guided by an interest in the outcome,
and must "attend," The like applies to the introduction of
qualitative distinctions into the hedonistic theory of conduct.
Apperception in the one case and discretion in the other cease to
be the mere registration of a simple and personally uncolored
sequence of permutations enforced by the factors of the external
world. There is implied a spiritual -- that is to say, active --
"teleological" continuity of process on the part of the
perceiving or of the discretionary agent, as the case may be.
It is on the ground of their departure from the stricter
hedonistic premises that Mill and, after him, Cairnes are able,
for instance, to offer their improvement upon the earlier
doctrine of cost of production as determining value. Since it is
conceived that the motives which guide men in their choice of
employments and of domicile differ from man to man and from class
to class, not only in degree, but in kind, and since varying
antecedents, of heredity and of habit, variously influence men in
their choice of a manner of life, therefore the mere quantitative
pecuniary stimulus cannot be depended on to decide the outcome
without recourse. There are determinable variations in the
alacrity with which different classes or communities respond to
the pecuniary stimulus; and in so far as this condition prevails,
the classes or communities in question are non-competing. Between
such non-competing groups the norm that determines values is not
the unmitigated norm of cost of production taken absolutely, but
only taken relatively. The formula of cost of production is
therefore modified into a formula of reciprocal demand. This
revision of the cost-of-production doctrine is extended only
sparingly, and the emphasis is thrown on the pecuniary
circumstances on which depend the formation and maintenance of
non-competing groups. Consistency with the earlier teaching is
carefully maintained, so far as may be; but extra-pecuniary
factors are, after all, even if reluctantly, admitted into the
body of the theory. So also, since there are higher and lower
motives, higher and lower pleasures, -- as well as motives
differing in degree, -- it follows that an unguided response even
to the mere quantitative pecuniary stimuli may take different
directions, and so may result in activities of widely differing
outcome. Since activities set up in this way through appeal to
higher and lower motives are no longer conceived to represent
simply a mechanically adequate effect of the stimuli, working
under the control of natural laws that tend to one beneficent
consummation, therefore the outcome of activity set up even by
the normal pecuniary stimuli may take a form that may or may not
be serviceable to the community. Hence laissez-faire ceases to be
a sure remedy for the ills of society. Human interests are still
conceived normally to be at one; but the detail of individual
conduct need not, therefore, necessarily serve these generic
human interests.(2*) Therefore, other inducements than the
unmitigated impact of pecuniary exigencies may be necessary to
bring about a coincidence of class or individual endeavor with
the interests of the community. It becomes incumbent on the
advocate of laissez-faire to "prove his minor premise." It is no
longer self-evident that:" Interests left to themselves tend to
harmonious combinations, and to the progressive preponderance of
the general good." (3*)
The natural-rights preconception begins to fall away as soon
as the hedonistic mechanics have been seriously tampered with.
Fact and right cease to coincide, because the individual in whom
the rights are conceived to inhere has come to be something more
than the field of intersection of natural forces that work out in
human conduct. The mechanics of natural liberty -- that assumed
constitution of things by force of which the free hedonistic play
of the laws of nature across the open field of individual choice
is sure to reach the right outcome -- is the hedonistic
psychology, and the passing of the doctrine of natural rights and
natural liberty whether as a premise or as a dogma, therefore
coincides with the passing of that mechanics of conduct on the
validity of which the theoretical acceptance of the dogma
depends. It is, therefore, something more than a coincidence that
the half-century which has seen the disintegration of the
hedonistic faith and of the associational psychology has also
seen the dissipation, in scientific speculations, of the
concomitant faith in natural rights and in that benign order of
nature of which the natural-rights dogma is a corollary.
It is, of course, not hereby intended to say that the later
psychological views and premises imply a less close dependence of
conduct on environment than do the earlier ones. Indeed, the
reverse may well be held to be true. The pervading characteristic
of later thinking is the constant recourse to a detailed analysis
of phenomena in causal terms. The modern catchword, in the
present connection, is" response to stimulus,' '. but the manner
in which this response is conceived has changed. The fact, and
ultimately the amplitude, at least in great part, of the reaction
to stimulus, is conditioned by the forces in impact; but the
constitution of the organism, as well as its attitude at the
moment of impact, in great part decides what will serve as a
stimulus, as well as what the manner and direction of the
response will be.
The later psychology is biological, as contrasted with the
metaphysical psychology of hedonism. It does not conceive the
organism as a causal hiatus. The causal sequence in the "reflex
arc" is, no doubt, continuous; but the continuity is not, as
formerly, conceived in terms of spiritual substance transmitting
a shock: it is conceived in terms of the life activity of the
organism. Human conduct, taken as the reaction of such an
organism under stimulus, may be stated in terms of tropism,
involving, of course, a very close-knit causal sequence between
the impact and the response, but at the same time imputing to the
organism a habit of life and a self-directing and selective
attention in meeting the complex of forces that make up its
environment. The selective play of this tropismatic complex that
constitutes the organism's habit of life under the impact of the
forces of the environment counts as discretion.
So far, therefore, as it is to be placed in contrast with the
hedonistic phase of the older psychological doctrines, the
characteristic feature of the newer conception is the recognition
of a selectively self-directing life process in the agent. While
hedonism seeks the causal determinant of conduct in the
(probable) outcome of action, the later conception seeks this
determinant in the complex of propensities that constitutes man a
functioning agent, that is to say, a personality. Instead of
pleasure ultimately determining what human conduct shall be, the
tropismatic propensities that eventuate in conduct ultimately
determine what shall be pleasurable. For the purpose in hand, the
consequence of the transition to the altered conception of human
nature and its relation to the environment is that the newer view
formulates conduct in terms of personality, whereas the earlier
view was content to formulate it in terms of its provocation and
its by-product. Therefore, for the sake of brevity, the older
preconceptions of the science are here spoken of as construing
human nature in inert terms, as contrasted with the newer, which
construes it in terms of functioning.
It has already appeared above that the second great article
of the metaphysics of classical political economy the belief in a
meliorative trend or a benign order of nature -- is closely
connected with the hedonistic conception of human nature; but
this connection is more intimate and organic than appears from
what has been said above. The two are so related as to stand or
fall together, for the latter is but the obverse of the former.
The doctrine of a trend in events imputes purpose to the sequence
of events; that is, it invests this sequence with a
discretionary, teleological character, which asserts itself in a
constraint over all the steps in the sequence by which the
supposed objective point is reached. But discretion touching a
given end must be single, and must alone cover all the acts by
which the end is to be reached. Therefore, no discretion resides
in the intermediate terms through which the end is worked out.
Therefore, man being such an intermediate term, discretion cannot
be imputed to him without violating the supposition. Therefore,
given an indefeasible meliorative trend in events, man is but a
mechanical intermediary in the sequence. It is as such a
mechanical intermediate term that the stricter hedonism construes
human nature.(4*) Accordingly, when more of teleological activity
came to be imputed to man, less was thereby allowed to the
complex of events. Or it may be put in the converse form: When
less of a teleological continuity came to be imputed to the
course of events, more was thereby imputed to man's life process.
The latter form of statement probably suggests the direction in
which the causal relation runs, more nearly than the former. The
change whereby the two metaphysical premises in question have
lost their earlier force and symmetry, therefore, amounts to a
(partial) shifting of the seat of putative personality from
inanimate phenomena to man.
It may be mentioned in passing, as a detail lying perhaps
afield, yet not devoid of significance for latter-day economic
speculation, that this elimination of personality, and so of
teleological content, from the sequence of events, and its
increasing imputation to the conduct of the human agent, is
incident to a growing resort to an apprehension of phenomena in
terms of process rather than in terms of outcome, as was the
habit in earlier schemes of knowledge. On this account the
categories employed are, in a gradually increasing degree,
categories of process, -- "dynamic" categories. But categories of
process applied to conduct, to discretionary action, are
teleological categories: whereas categories of process applied in
the case of a sequence where the members of the sequence are not
conceived to be charged with discretion, are, by the force of
this conception itself, non-teleological, quantitative
categories. The continuity comprised in the concept of process as
applied to conduct is consequently a spiritual, teleological
continuity. whereas the concept of process under the second head,
the non-teleological sequence, comprises a continuity of a
quantitative, causal kind, substantially the conservation of
energy. In its turn the growing resort to categories of process
in the formulation of knowledge is probably due to the
epistemological discipline of modern mechanical industry, the
technological exigencies of which enforce a constant recourse to
the apprehension of phenomena in terms of process, differing
therein from the earlier forms of industry, which neither
obtruded visible mechanical process so constantly upon the
apprehension nor so imperatively demanded an articulate
recognition of continuity in the processes actually involved. The
contrast in this respect is still more pronounced between the
discipline of modern life in an industrial community and the
discipline of life under the conventions of status and exploit
that formerly prevailed.
To return to the benign order of nature, or the meliorative
trend, -- its passing, as an article of economic faith, was not
due to criticism leveled against it by the later classical
economists on grounds of its epistemological incongruity. It was
tried on its merits, as an alleged account of facts; and the
weight of evidence went against it. The belief in a
self-realising trend bad no sooner reached a competent and
exhaustive statement -- e.g., at Bastiat's hands, as a dogma of
the harmony of interests specifically applicable to the details
of economic life than it began to lose ground. With his usual
concision and incisiveness, Cairnes completed the destruction of
Bastiat's special dogma, and put it forever beyond a rehearing.
But Cairnes is not a destructive critic of the classical
political economy, at least not in intention: he is an
interpreter and continuer -- perhaps altogether the clearest and
truest continuer -- of the classical teaching. While he confuted
Bastiat and discredited Bastiat's peculiar dogma, he did not
thereby put the order of nature bodily out of the science. He
qualified and improved it, very much as Mill qualified and
improved the tenets of the hedonistic psychology. As Mill and the
ethical speculation of his generation threw more of personality
into the hedonistic psychology, so Cairnes and the speculators on
scientific method (such as Mill and Jevons) attenuated the
imputation of personality or teleological content to the process
of material cause and effect. The work is of course, by no means,
an achievement of Cairnes alone; but he is, perhaps, the best
exponent of this advance in economic theory. In Cairnes's
redaction this foundation of the science became the concept of a
colorless normality. It was in Cairnes's time the fashion for
speculators in other fields than the physical sciences to look to
those sciences for guidance in method and for legitimation of the
ideals of scientific theory which they were at work to realize.
More than that, the large and fruitful achievements of the
physical sciences had so far taken men's attention captive as to
give an almost instinctive predilection for the methods that had
approved themselves in that field. The ways of thinking which had
on this ground become familiar to all scholars occupied with any
scientific inquiry, had permeated their thinking on any subject
whatever. This is eminently true of British thinking.
It had come to be a commonplace of the physical sciences that
"natural laws" are of the nature of empirical generalisations
simply, or even of the nature of arithmetical averages. Even the
underlying preconception of the modern physical sciences -- the
law of the conservation of energy, or persistence of quantity --
was claimed to be an empirical generalisation, arrived at
inductively and verified by experiment. It is true the alleged
proof of the law took the whole conclusion for granted at the
start, and used it constantly as a tacit axiom at every step in
the argument which was to establish its truth; but that fact
serves rather to emphasise than to call in question the abiding
faith which these empiricists had in the sole efficacy of
empirical generalisation. Had they been able overtly to admit any
other than an associational origin of knowledge, they would have
seen the impossibility of accounting on the mechanical grounds of
association for the premise on which a;l experience of mechanical
fact rests. That any other than a mechanical origin should be
assigned to experience, or that any other than a so-conceived
empirical ground was to be admitted for any general principle,
was incompatible with the prejudices of men trained in the school
of the associational psychology, however widely they perforce
departed from this ideal in practice. Nothing of the nature of a
personal element was to be admitted into these fundamental
empirical generalisations; and nothing, therefore, of the nature
of a discretionary or teleological movement was to be comprised
in the generalisations to be accepted as" natural laws." Natural
laws must in no degree be imbued with personality, must say
nothing of an ulterior end; but for all that they remained "laws"
of the sequences subsumed under them. So far is the reduction to
colorless terms carried by Mill, for instance, that he formulates
the natural laws as empirically ascertained sequences simply,
even excluding or avoiding all imputation of causal continuity,
as that term is commonly understood by the unsophisticated. In
Mill's ideal no more of organic connection or continuity between
the members of a sequence is implied in subsuming them under a
law of causal relationship than is given by the ampersand, He is
busied with dynamic sequences, but he persistently confines
himself to static terms.
Under the guidance of the associational psychology,
therefore, the extreme of discontinuity in the deliverances of
inductive research is aimed at by those economists Mill and
Cairnes being taken as typical -- whose names have been
associated with deductive methods in modern science. With a fine
sense of truth they saw that the notion of causal continuity, as
a premise of scientific generalisation, is an essentially
metaphysical postulate; and they avoided its treacherous ground
by denying it, and construing causal sequence to mean a
uniformity of co-existences and successions simply. But, since a
strict uniformity is nowhere to be observed at first hand in the
phenomena with which the investigator is occupied, it has to be
found by a laborious interpretation of the phenomena and a
diligent abstraction and allowance for disturbing circumstances,
whatever may be the meaning of a disturbing circumstance where
causal continuity is denied. In this work of interpretation and
expurgation the investigator proceeds on a conviction of the
orderliness of the natural sequence. "Natura non facit saltum": a
maxim which has no meaning within the stricter limits of the
associational theory of knowledge.
Before anything can be said as to the orderliness of the
sequence, a point of view must be chosen by the speculator, with
respect to which the sequence in question does or does not
fulfill this condition of orderliness; that is to say, with
respect to which it is a sequence. The endeavor to avoid all
metaphysical premises fails here as everywhere. The
associationists, to whom economics owes its transition from the
older classical phase to the modern or quasi-classical, chose as
their guiding point of view the metaphysical postulate of
congruity, -- in substance, the "similarity" of the
associationist theory of knowledge. This must be called their
proton pseudos, if associationism pure and simple is to be
accepted. The notion of congruity works out in laws of
resemblance and equivalence, in both of which it is plain to the
modern psychologist that a metaphysical ground of truth,
antecedent to and controlling empirical data, is assumed. But the
use of the postulate of congruence as a test of scientific truth
has the merit of avoiding all open dealing with an imputed
substantiality of the data handled, such as would be involved in
the overt use of the concept of causation. The data are congruous
among themselves, as items of knowledge; and they may therefore
be handled in a logical synthesis and concatenation on the basis
of this congruence alone, without committing the scientist to an
imputation of a kinetic or motor relation between them. The
metaphysics of process is thereby avoided, in appearance. The
sequences are uniform or consistent with one another, taken as
articles of theoretical synthesis simply" and so they become
elements of a system or discipline of knowledge in which the test
of theoretical truth is the congruence of the system with its
premises.
In all this there is a high-wrought appearance of
matter-of-fact, and all metaphysical subreption of a
non-empirical or non-mechanical standard of reality or
substantiality is avoided in appearance. The generalisations
which make up such a system of knowledge are, in this way, stated
in terms of the system itself; and when a competent formulation
of the alleged uniformities has been so made in terms of their
congruity or equivalence with the prime postulates of the system,
the work of theoretical inquiry is done.
The concrete premises from which proceeds the systematic
knowledge of this generation of economists are certain very
concise assumptions concerning human nature, and certain slightly
less concise generalisations of physical fact,(5*) presumed to be
mechanically empirical generalisations. These postulates afford
the standard of normality. Whatever situation or course of events
can be shown to express these postulates without mitigation is
normal; and wherever a departuRe from this normal course of
things occurs, it is due to disturbing causes,that is to say, to
causes not comprised in the main premises of the science, -- and
such departures are to be taken account of by way of
qualification. Such departures and such qualification are
constantly present in the facts to be handled by the science;
but, being not congruous with the underlying postulates, they
have no place in the body of the science. The laws of the
science, that which makes up the economist's theoretical
knowledge, are laws of the normal case. The normal case does not
occur in concrete fact. These laws are, therefore, in Cairnes's
terminology, "hypothetical" truths; and the science is a
"hypothetical" science. They apply to concrete facts only as the
facts are interpreted and abstracted from, in the light of the
underlying postulates. The science is, therefore, a theory of the
normal case, a discussion of the concrete facts of life in
respect of their degree of approximation to the normal case. That
is to say, it is a taxonomic science.
Of course, in the work actually done by these economists this
standpoint of rigorous normality is not consistently maintained;
nor is the unsophisticated imputation of causality to the facts
under discussion consistently avoided. The associationist
postulate, that causal sequence means empirical uniformity
simply, is in great measure forgotten when the subject-matter of
the science is handled in detail. Especially is it true that in
Mill the dry light of normality is greatly relieved by a strong
common sense. But the great truths or laws of the science remain
hypothetical laws; and the test of scientific reality is
congruence with the hypothetical laws, not coincidence with
matter-of-fact events.
The earlier, more archaic metaphysics of the science, which
saw in the orderly correlation and sequence of events a
constraining guidance of an extra-causal, teleological kind, in
this way becomes a metaphysics of normality which asserts no
extra-causal constraint over events, but contents itself with
establishing correlations, equivalencies, homologies, and
theories concerning the conditions of an economic equilibrium.
The movement, the process of economic life, is not overlooked,
and it may even be said that it is not neglected, but the pure
theory, in its final deliverances, deals not with the dynamics,
but with the statics of the case. The concrete subject-matter of
the science is, of course, the process of economic life, -- that
is unavoidably the case, -- and in so far the discussion must be
accepted as work bearing on the dynamics of the phenomena
discussed; but even then it remains true that the aim of this
work in dynamics is a determination and taxis of the outcome of
the process under discussion rather than a theory of the process
as such. The process is rated in terms of the equilibrium to
which it tends or should tend, not conversely, The outcome of the
process, taken in its relation of equivalence within the system,
is the point at which the inquiry comes to rest. It is not
primarily the point of departure for an inquiry into what may
follow, The science treats of a balanced system rather than of a
proliferation. In this lies its characteristic difference from
the later evolutionary sciences. It is this characteristic bent
of the science that leads its spokesman, Cairnes, to turn so
kindly to chemistry rather than to the organic sciences, when he
seeks an analogy to economics among the physical sciences.(6*)
What Cairnes has in mind in his appeal to chemistry is, of
course, the received, extremely taxonomic (systematic) chemistry
of his own time, not the tentatively genetic theories of a
slightly later day.
It may seem that in the characterisation just offered of the
standpoint of normality in economics there is too strong an
implication of colorlessness and impartiality. The objection
holds as regards much of the work of the modern economists of the
classical line. It will hold true even as to much of Cairnes's
work, but it cannot be admitted as regards Cairnes's ideal of
scientific aim and methods. The economists whose theories Cairnes
received and developed, assuredly did not pursue the discussion
of the normal case with an utterly dispassionate animus. They had
still enough of the older teleological metaphysics left to give
color to the accusation brought against them that they were
advocates of laissez-faire. The preconception of the
utilitarians, -- in substance the natural-rights preconception,
-- that unrestrained human conduct will result in the greatest
human happiness, retains so much of its force in Cairnes's time
as is implied in the then current assumption that what is normal
is also right. The economists, and Cairnes among them, not only
are concerned to find out what is normal and to determine what
consummation answers to the normal, but they also are at pains to
approve that consummation. It is this somewhat uncritical and
often unavowed identification of the normal with the right that
gives colorable ground for the widespread vulgar prejudice, to
which Cairnes draws attention,(7*) that political economy
"sanctions" one social arrangement and "condemns" another. And it
is against this uncritical identification of two essentially
unrelated principles or categories that Cairnes's essay on
"Political Economy and Laissez-faire," and in good part also that
on Bastiat, are directed. But, while this is one of the many
points at which Cairnes has substantially advanced the ideals of
the science, his own concluding argument shows him to have been
but half-way emancipated from the prejudice, even while most
effectively combating it.(8*) It is needless to point out that
the like prejudice is still present in good vigor in many later
economists who have had the full benefit of Cairnes's teachings
on this head.(9*) Considerable as Cairnes's achievement in this
matter undoubtedly was, it effected a mitigation rather than an
elimination of the untenable metaphysics against which he
contended.
The advance in the general point of view from animistic
teleology to taxonomy is shown in a curiously succinct manner in
a parenthetical clause of Cairnes's in the chapter on Normal
Value.(10*) With his acceptance of the later point of view
involved in the use of the new term, Cairnes becomes the
interpreter of the received theoretical results. The received
positions are not subjected to a destructive criticism. The aim
is to complete them where they fall short and to cut off what may
be needless or what may run beyond the safe ground of scientific
generalisation. In his work of redaction, Cairnes does not avow
-- probably he is not sensible of -- any substantial shifting of
the point of view or any change in the accepted ground of
theoretic reality. But his advance to an unteleological taxonomy
none the less changes the scope and aim of his theoretical
discussion. The discussion of Normal Value may be taken in
illustration.
Cairnes is not content to find (with Adam Smith) that value
will "naturally" coincide with or be measured by cost of
production, or even (with Mill) that cost of production must, in
the long run, "necessarily" determine value. "This is to take a
much too limited view of the range of this phenomenon." (11*) He
is concerned to determine not only this general tendency of
values to a normal, but all those characteristic circumstances as
well which condition this tendency and which determine the normal
to which values tend. His inquiry pursues the phenomena of value
in a normal economic system rather than the manner and rate of
approach of value relations to a teleologically or hedonistically
defensible consummation. It therefore becomes an exhaustive but
very discriminating analysis of the circumstances that bear upon
market values, with a view to determine what circumstances are
normally present; that is to say, what circumstances conditioning
value are commonly effective and at the same time in consonance
with the premises of economic theory, These effective conditions,
in so far as they are not counted anomalous and, therefore, to be
set aside in the theoretical discussion, are the circumstances
under which a hedonistic valuation process in any modern
industrial community is held perforce to take place, -- the
circumstances which are held to enforce a recognition and rating
of the pleasure-bearing capacity of facts. They are not, as under
the earlier cost-of-production doctrines, the circumstances which
determine the magnitude of the forces spent in the production of
the valuable article. Therefore, the normal (natural) value is no
longer (as with Adam Smith, and even to some extent with his
classical successors) the primary or initial fact in value
theory, the substantial fact of which the market value is an
approximate expression and by which the latter is controlled. The
argument does not, as formerly, set out from that expenditure of
personal force which was once conceived to constitute the
substantial value of goods, and then construe market value to be
an approximate and uncertain expression of this substantial fact.
The direction in which the argument runs is rather the reverse of
this. The point of departure is taken from the range of market
values and the process of bargaining by which these values are
determined. This latter is taken to be a process of
discrimination between various kinds and degrees of discomfort,
and the average or consistent outcome of such a process of
bargaining constitutes normal value. It is only by virtue of a
presumed equivalence between the discomfort undergone and the
concomitant expenditure, whether of labor or of wealth, that the
normal value so determined is conceived to be an expression of
the productive force that goes into the creation of the valuable
goods. Cost being only in uncertain equivalence with sacrifice or
discomfort, as between different persons, the factor of cost
falls into the background; and the process of bargaining, which
is in the foreground, being a process of valuation, a balancing
of individual demand and supply, it follows that a law of
reciprocal demand comes in to supplant the law of cost. In all
this the proximate causes at work in the determination of values
are plainly taken account of more adequately than in earlier
cost-of-production doctrines; but they are taken account of with
a view to explaining the mutual adjustment and interrelation of
elements in a system rather than to explain either a
developmental sequence or the working out of a fore-ordained end.
This revision of the cost-of-production doctrine, whereby it
takes the form of a law of reciprocal demand, is in good part
effected by a consistent reduction of cost to terms of sacrifice,
-- a reduction more consistently carried through by Cairnes than
it had been by earlier hedonists, and extended by Cairnes's
successors with even more far-reaching results. By this step the
doctrine of cost is not only brought into closer accord with the
neo-hedonistic premises, in that it in a greater degree throws
the stress upon the factor of personal discrimination, but it
also gives the doctrine a more general bearing upon economic
conduct and increases its serviceability as a comprehensive
principle for the classification of economic phenomena. In the
further elaboration of the hedonistic theory of value at the
hands of Jevons and the Austrians the same principle of sacrifice
comes to serve as the chief ground of procedure.
Of the foundations of later theory, in so far as the
postulates of later economists differ characteristically from
those of Mill and Cairnes, little can be said in this place.
Nothing but the very general features of the later development
can be taken up; and even these general features of the existing
theoretic situation can not be handled with the same confidence
as the corresponding features of a past phase of speculation.
With respect to writers of the present or the more recent past
the work of natural selection, as between variants of scientific
aim and animus and between more or less divergent points of view,
has not yet taken effect; and it would be over-hazardous to
attempt an anticipation of the results of the selection that lies
in great part yet in the future. As regards the directions of
theoretical work suggested by the names of Professor Marshall,
Mr. Cannan, Professor Clark, Mr. Pierson, Austrian Professor
Loria, Professor Schmoller, the group, -- no off-hand decision is
admissible as between these candidates for the honor, or, better,
for the work, of continuing the main current of economic
speculation and inquiry. No attempt will here be made even to
pass a verdict on the relative claims of the recognised two or
three main "schools" of theory, beyond the somewhat obvious
finding that, for the purpose in hand, the so-called Austrian
school is scarcely distinguishable from the neo-classical, unless
it be in the different distribution of emphasis. The divergence
between the modernised classical views, on the one hand, and the
historical and Marxist schools, on the other hand, is wider, --
so much so, indeed, as to bar out a consideration of the
postulates of the latter under the same head of inquiry with the
former. The inquiry, therefore, confines itself to the one line
standing most obviously in unbroken continuity with that body of
classical economics whose life history has been traced in outline
above. And, even for this phase of modernised classical
economics, it seems necessary to limit discussion, for the
present, to a single strain, selected as standing peculiarly
close to the classical source, at the same time that it shows
unmistakable adaptation to the later habits of thought and
methods of knowledge.
For this later development in the classical line of political
economy, Mr. Keynes's book may fairly be taken as the maturest
exposition of the aims and ideals of the science; while Professor
Marshall excellently exemplifies the best work that is being done
under the guidance of the classical antecedents. As, after a
lapse of a dozen or fifteen years from Cairnes's days of full
conviction, Mr. Keynes interprets the aims of modern economic
science, it has less of the "hypothetical" character assigned it
by Cairnes. that is to say, it confines its inquiry less closely
to the ascertainment of the normal case and the interpretative
subsumption of facts under the normal. It takes fuller account of
the genesis and developmental continuity of all features of
modern economic life, gives more and closer attention to
institutions and their history. This is, no doubt, due, in part
at least, to impulse received from German economists; and in so
far it also reflects the peculiarly vague and bewildered attitude
of protest that characterises the earlier expositions of the
historical school. To the same essentially extraneous source is
traceable the theoretic blur embodied in Mr. Keynes's attitude of
tolerance towards the conception of economics as a "normative"
science having to do with "economic ideals", or an "applied
economics" having to do with "economic precepts." (12*) An
inchoate departure from the consistent taxonomic ideals shows
itself in the tentative resort to historical and genetic
formulations, as well as in Mr. Keynes's pervading inclination to
define the scope of the science, not by exclusion of what are
conceived to be non-economic phenomena, but by disclosing a point
of view from which all phenomena are seen to be economic facts.
The science comes to be characterised not by the delimitation of
a range of facts, as in Cairnes,(13*) but as an inquiry into the
bearing which all facts have upon men's economic activity. It is
no longer that certain phenomena belong within the science, but
rather that the science is concerned with any and all phenomena
as seen from the point of view of the economic interest. Mr.
Keynes does not go fully to the length which this last
proposition indicates. He finds (14*) that political economy"
treats of the phenomena arising out of the economic activities of
mankind in society"; but, while the discussion by which he leads
up to this definition might be construed to say that all the
activities of mankind in society have an economic bearing, and
should therefore come within the view of the science, Mr. Keynes
does not carry out his elucidation of the matter to that broad
conclusion. Neither can it be said that modern political economy
has, in practice, taken on the scope and character which this
extreme position would assign it.
The passage from which the above citation is taken is highly
significant also in another and related bearing, and it is at the
same time highly characteristic of the most effective modernised
classical economics. The subject matter of the science has come
to be the "economic activities" of mankind, and the phenomena in
which these activities manifest themselves. So Professor
Marshall's work, for instance, is, in aim, even if not always in
achievement, a theoretical handling of human activity in its
economic bearing, -- an inquiry into the multiform phases and
ramifications of that process of valuation of the material means
of life by virtue of which man is an economic agent. And still it
remains an inquiry directed to the determination of the
conditions of an equilibrium of activities and a quiescent normal
situation. It is not in any eminent degree an inquiry into
cultural or institutional development as affected by economic
exigencies or by the economic interest of the men whose
activities are analysed and portrayed. Any sympathetic reader of
Professor Marshall's great work -- and that must mean every
reader -- comes away with a sense of swift and smooth movement
and interaction of parts; but it is the movement of a
consummately conceived and self-balanced mechanism, not that of a
cumulatively unfolding process or an institutional adaptation to
cumulatively unfolding exigencies. The taxonomic bearing is,
after all, the dominant feature. It is significant of the same
point that even in his discussion of such vitally dynamic
features of the economic process as the differential
effectiveness of different laborers or of different industrial
plants, as well as of the differential advantages of consumers,
Professor Marshall resorts to an adaptation of so essentially
taxonomic a category as the received concept of rent. Rent is a
pecuniary category, a category of income, which is essentially a
final term, not a category of the motor term, work or
interest.(15*) It is not a factor or a feature of the process of
industrial life, but a phenomenon of the pecuniary situation
which emerges from this process under given conventional
circumstances. However far-reaching and various the employment of
the rent concept in economic theory has been, it has through all
permutations remained, what it was to begin with, a rubric in the
classification of incomes. It is a pecuniary, not an industrial
category. In so far as resort is had to the rent concept in the
formulation of a theory of the industrial process, -- as in
Professor Marshall's work, -- it comes to a statement of the
process in terms of its residue. Let it not seem presumptuous to
say that. great and permanent as is the value of Professor
Marshall's exposition of quasi-rents and the like, the endeavor
which it involves to present in terms of a concluded system what
is of the nature of a fluent process has made the exposition
unduly bulky, unwieldy, and inconsequent.
There is a curious reminiscence of the perfect taxonomic day
in Mr. Keynes's characterisation of political economy as a
"positive science," "the sole province of which is to establish
economic uniformities"; (16*) and, in this resort to the
associationist expedient of defining a natural law as a"
uniformity," Mr. Keynes is also borne out by Professor
Marshall.(17*) But this and other survivals of the taxonomic
terminology, or even of the taxonomic canons of procedure, do not
binder the economists of the modern school from doing effective
work of a character that must be rated as genetic rather than
taxonomic. Professor Marshall's work in economics is not unlike
that of Asa Gray in botany, who, while working in great part
within the lines of "systematic botany" and adhering to its
terminology, and on the whole also to its point of view, very
materially furthered the advance of the science outside the scope
of taxonomy.
Professor Marshall shows an aspiration to treat economic life
as a development; and, at least superficially, much of his work
bears the appearance of being a discussion of this kind. In this
endeavor his work is typical of what is aimed at by many of the
later economists. The aim shows itself with a persistent
recurrence in his Principles. His chosen maxim is, "Natura non
facit saltum," -- a maxim that might well serve to designate the
prevailing attitude of modern economists towards questions of
economic development as well as towards questions of
classification or of economic policy. His insistence on the
continuity of development and of the economic structure of
communities is a characteristic of the best work along the later
line of classical political economy. All this gives an air of
evolutionism to the work. Indeed, the work of the neo-classical
economics might be compared, probably without offending any of
its adepts, with that of the early generation of Darwinians,
though such a comparison might somewhat shrewdly have to avoid
any but superficial features. Economists of the present day are
commonly evolutionists, in a general way. They commonly accept,
as other men do, the general results of the evolutionary
speculation in those directions in which the evolutionary method
has made its way. But the habit of handling by evolutionist
methods the facts with which their own science is concerned has
made its way among the economists to but a very uncertain degree.
The prime postulate of evolutionary science, the
preconception constantly underlying the inquiry, is the notion of
a cumulative causal sequence; and writers on economics are in the
habit of recognising that the phenomena with which they are
occupied are subject to such a law of development. Expressions of
assent to this proposition abound. But the economists have not
worked out or hit upon a method by which the inquiry in economics
may consistently be conducted under the guidance of this
postulate. Taking Professor Marshall as exponent, it appears
that, while the formulations of economic theory are not conceived
to be arrived at by way of an inquiry into the developmental
variation of economic institutions and the like, the theorems
arrived at are held, and no doubt legitimately, to apply to the
past,(18*) and with due reserve also to the future, phases of the
development. But these theorems apply to the various phases of
the development not as accounting for the developmental sequence,
but as limiting the range of variation. They say little, if
anything, as to the order of succession, as to the derivation and
the outcome of any given phase, or as to the causal relation of
one phase of any given economic convention or scheme of relations
to any other. They indicate the conditions of survival to which
any innovation is subject, supposing the innovation to have taken
place, not the conditions of variational growth. The economic
laws, the" statements of uniformity," are therefore, when
construed in an evolutionary bearing, theorems concerning the
superior or the inferior limit of persistent innovations, as the
case may be.(19*) It is only in this negative, selective bearing
that the current economic laws are held to be laws of
developmental continuity; and it should be added that they have
hitherto found but relatively scant application at the hands of
the economists, even for this purpose.
Again, as applied to economic activities under a given
situation, as laws governing activities in equilibrium, the
economic laws are, in the main, laws of the limits within which
economic action of a given purpose runs. They are theorems as to
the limits which the economic (commonly the pecuniary) interest
imposes upon the range of activities to which the other life
interests of men incite, rather than theorems as to the manner
and degree in which the economic interest creatively shapes the
general scheme of life. In great part they formulate the normal
inhibitory effect of economic exigencies rather than the
cumulative modification and diversification of human activities
through the economic interest, by initiating and guiding habits
of life and of thought. This, of course, does not go to say that
economists are at all slow to credit the economic exigencies with
a large share in the growth of culture; but, while claims of this
kind are large and recurrent, it remains true that the laws which
make up the framework of economic doctrine are, when construed as
generalisations of causal relation, laws of conservation and
selection, not of genesis and proliferation. The truth of this,
which is but a commonplace generalisation, might be shown in
detail with respect to such fundamental theorems as the laws of
rent, of profits, of wages, of the increasing or diminishing
returns of industry, of population, of competitive prices, of
cost of production.
In consonance with this quasi-evolutionary tone of the
neo-classical political economy, or as an expression of it, comes
the further clarified sense that nowadays attaches to the terms
"normal" and economic "laws." The laws have gained in
colorlessness, until it can no longer be said that the concept of
normality implies approval of the phenomena to which it is
applied.(20*) They are in an increasing degree laws of conduct,
though they still continue to formulate conduct in hedonistic
terms; that is to say, conduct is construed in terms of its
sensuous effect, not in terms of its teleological content. The
light of the science is a drier light than it was, but it
continues to be shed upon the accessories of human action rather
than upon the process itself. The categories employed for the
purpose of knowing this economic conduct with which the
scientists occupy themselves are not the categories under which
the men at whose hands the action takes place themselves
apprehend their own action at the instant of acting. Therefore,
economic conduct still continues to be somewhat mysterious to the
economists; and they are forced to content themselves with
adumbrations whenever the discussion touches this central,
substantial fact.
All this, of course, is intended to convey no dispraise of
the work done, nor in any way to disparage the theories which the
passing generation of economists have elaborated, or the really
great and admirable body of Knowledge which they have brought
under the hand of the science; but only to indicate the direction
in which the inquiry in its later phases -- not always with full
consciousness -- is shifting as regards its categories and its
point of view. The discipline of life in a modern community,
particularly the industrial life, strongly reinforced by the
modern sciences, has divested our knowledge of non-human
phenomena of that fullness of self-directing life that was once
imputed to them, and has reduced this knowledge to terms of
opaque causal sequence. It has thereby narrowed the range of
discretionary, teleological action to the human agent alone; and
so it is compelling our knowledge of human conduct, in so far as
it is distinguished from the non-human, to fall into teleological
terms. Foot-pounds, calories, geometrically progressive
procreation, and doses of capital, have not been supplanted by
the equally uncouth denominations of habits, propensities,
aptitudes, and conventions, nor does there seem to be any
probability that they will be; but the discussion which continues
to run in terms of the former class of concepts is in an
increasing degree seeking support in concepts of the latter
class.
NOTES:
1. So, e.g., Roscher, Comte, the early socialists, J.S. Mill, and
later Spencer, Schaeffle, Wagner.
2. "Let us not confound the statement that human interests are at
one with the statement that class interests are at one. The
latter I believe to be as false as the former is true... But
accepting the major premises of the syllogism, that the interests
of human beings are fundamentally the same, how as to the minor?
-- how as to the assumption that people know their interests in
the sense in which they are identical with the interests of
others, and that they spontaneously follow them in this sense?"
-- Cairnes, Essays in Political Economy (London, 1873), p. 245.
This question cannot consistently be asked by an adherent of the
stricter hedonism.
3. Bastiat, quoted by Cairnes, Essays, p. 319.
4. It may be remarked, by the way, that the use of the
differential calculus and similar mathematical expedients in the
discussion of marginal utility and the like, proceeds on the
psychological ground, and that the theoretical results so arrived
at are valid to the full extent only if this hedonistic
psychology is accepted.
5. See, e.g., Cairnes, Character and Logical Method (New York),
p. 71.
6. Character and Logical Method, p. 62.
7. Essays in Political Economy, pp. 260-264.
8. See especially Essays, pp. 263, 264.
9. It may be interesting to point out that the like
identification of the categories of normality and right gives the
dominant note of Mr. Spencer's ethical and social philosophy, and
that later economists of the classical and social philosophy to
be Spencerians.
10. "Normal value (called by Adam Smith and Ricardo "natural
value," and by Mill "necessary value," but best expressed, it
seems to me, by the term which I have used)." Leading Principles
(New York), p. 45.
11. Leading Principles, p. 45.
12. Scope and Method of Political Economy (London, 1891), chaps.
i and ii.
13. Character and Logical Method; e.g., Lecture II, especially
pp. 53, 54, 71.
14. Scope and Method of Political Economy, chap. iii,
particularly p. 97.
15. "Interest" is, of course, here used in the sense which it has
in modern psychological discussion.
16. Scope and Method of Political Economy, p. 46.
17. Principles of Economics, Vol. 1, Book 1, chap. vi, sect. 6,
especially p. 105 (3rd edition).
18. See, e.g., Professor Marshall's "Reply" to Professor
Cunningham in the Economic Journal for 1892, pp. 508-113.
19. This is well illustrated by what Professor Marshall says of
the Ricardian law of rent in his "Reply" cited above.
20. See, e.g., Marshall, Principles, Book I, chap. vi, sect. 6,
pp. 105-108. The like dispassionateness is visible in most other
modern writers on theory; as, e.g., Clark, Cannan, and the
Austrians.